Nintendo's surprise announcement that it would cut the price of its recently launched 3DS handheld gaming system by a third is as much about trying to maintain leadership in an increasingly competitive environment as it is about trying to goose the lagging system's sales.
"Clearly [sales are] part of it," David Cole, president of gaming market analysis company DFC Intelligence, tells Marketing Daily . "I think the other side of it is Sony launching a new system at a compelling price point means that the competition is going to be rough going forward."
The maker of the Gameboy, DS and DSi has long held the market leadership position of handheld games, Cole notes. But increasing adoption of tablets and smartphones as a gaming platform and the scheduled launch of Sony's handheld Vita system could threaten that.
"They seem to be willing to take a loss to maintain that market position," Cole says. "It really says they were looking at the competition and wanted to respond aggressively."
Regardless, sales of the much-hyped glasses-free 3D gaming system have been disappointing. In the U.S., only 830,000 units have been sold since the device's release in late March. By reducing the price by $80, from $249.99 to $169.99 (effective Aug. 12), the company is hoping to goose sales going into the holiday season. Sony's Vita, which will include WiFi and 3G wireless capabilities, has been initially priced at $249, and is expected by the holiday season.
"Never in Nintendo's history have we lowered prices to such an extent, less than half a year since the product launch," wrote Nintendo president and CEO Satoru Iwata, in a letter posted online (according to the New York Times). "But we have judged that unless we move decisively now, there is a high possibility that we will not see many of our customers enjoying a Nintendo 3DS."
For those who paid the premium to be the first to have the device, Nintendo offered compensation in the form of 20 free downloadable games available through the company's online store. Some of the games will eventually be available to other users willing to pay for them, while some will only be available to those early adopters. Whether that is enough to stem an outcry of anger remains to be seen, although Cole notes Nintendo again may have an ulterior motive for offering sales through its online channel.
"If you're an early adopter, you've got to know the price is going to drop," he says. "The free download of a game -- that's more about getting people to go online and start downloading stuff."